Correlation Between Herald Investment and Ashtead Technology

Can any of the company-specific risk be diversified away by investing in both Herald Investment and Ashtead Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Herald Investment and Ashtead Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Herald Investment Trust and Ashtead Technology Holdings, you can compare the effects of market volatilities on Herald Investment and Ashtead Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Herald Investment with a short position of Ashtead Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Ashtead Technology.

Diversification Opportunities for Herald Investment and Ashtead Technology

-0.36

Correlation Coefficient

Herald Investment  Ashtead Technology

Very good diversification

The 3 months correlation between Herald and Ashtead is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and Herald Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Herald Investment Trust are associated (or correlated) with Ashtead Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Technology has no effect on the direction of Herald Investment i.e., Herald Investment and Ashtead Technology go up and down completely randomly.

Pair Corralation between Herald Investment and Ashtead Technology

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.34 times more return on investment than Ashtead Technology. However, Herald Investment Trust is 2.93 times less risky than Ashtead Technology. It trades about 0.3 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.07 per unit of risk. If you would invest  209,000  in Herald Investment Trust on September 14, 2024 and sell it today you would earn a total of  40,000  from holding Herald Investment Trust or generate 19.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Herald Investment Trust  vs.  Ashtead Technology Holdings

Herald Investment Trust

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Herald Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ashtead Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Herald Investment and Ashtead Technology

The main advantage of trading using opposite Herald Investment and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, Ashtead Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ashtead Technology will offset losses from the drop in Ashtead Technology's long position.

The idea behind Herald Investment Trust and Ashtead Technology Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.